1999 BonusDeclaration

Article date: 15 January 1999

Nearly 70,000 people will share in  a record £1.25 billionprojected maturity payout from Norwich Union in 1999.

Group Chief Executive Richard Harvey said: ‘Norwich Unionhas many customers whose with-profits policies will be maturing in1999 and they are enjoying excellent returns, well above both therate of inflation and building society account rates. Our aim is toprovide superior value for money.’

Payouts in 1999

Overall payouts on the newer style unitised policies have beenimproved. The rate of additional bonus varies according to the yearthe money was invested. For all years of investment the rate ofadditional bonuses has increased again.

For a man paying £200 per month into a ten year unitised NorwichUnion personal pension plan, the payout will be £40,453,representing a yield of 10.1% (1998:9.3%).

Payouts on the older-style conventional policies are similar toa year ago for the same policy term.

For a conventional £50 a month 25 year Norwich Union endowmentplan taken out by a 29 year old man, the 1999 payout will be£98,037 (1998: £100,247), giving a yield of 12.9% (1998:13%). Thereturn from a building society account would have been around 6.3%.The average inflation rate was 5.7%.

For a similar man saving £50 a month with a ten yearconventional Norwich Union endowment plan, the payout will be£9,929 (1998: £10,063), representing a yield of 9.7% (1998: 10.0%).The return from a building society account over this period wouldhave been around 4.0%, while inflation was 3.2%.

For a man paying £200 a month into a 15 year conventionalNorwich Union self-employed pension plan with a retirement age of65, the payout will be £107,079 (1998: £117,914) representing ayield of 13.4% (1998: 14.5%). Inflation over this period was3.9%.

Annual Bonus Rates

Annual bonus rates have been reduced for 1999 to reflectexpected future lower long-term investment returns. 1998 was a yearwhen the redemption yield on longer dated gilts fell from 6.5% to4.5%.

The rates for the current series of unitised policies untilfurther notice will be:

 Savings5.5%(1998: 6.0%)
 Pensions6.0%(1998: 6.75%)

The rates for conventional with-profits policies at 31/12/98are:

 Savings2.0% on guaranteed
benefit plus

3.25% on attaching

(1998: 2.5% and 4.0%)
 Pensions1.5% on guaranteed
benefits plus

2.5% on attaching

(1998: 2.5% and 3.5%)

Richard Harvey commented: 'Against a wider background of fallinginterest rates, our view of the longer-term investment outlook hasled us to further adjust annual bonus levels. We believe annualbonuses need to be set at a realistic level, which allows us theinvestment freedom to achieve better overall investment returnswhich can be passed to policyholders by additional bonuses addedinto their payout’.

Press enquiries: Andrew Stronach 01603 682730

Analyst enquiries: Geoff Shaw 01603 683492

Notes to editors


There are two types of with-profits policies:Conventional and Unitised.


Contributions secure a guaranteed benefit. Bonuses are added tothe guaranteed benefit annually and at the end of the policy termas detailed below.

The payout under a conventional with-profits policy is made upof three elements: the guaranteed benefit, annual bonus andadditional bonus.

Guaranteed benefit (also known as sum insured): This is theamount payable at the date of the claim (e.g. maturity or earlierdeath). Bonuses are added to this amount over the term of thepolicy to make up the final payout.

Annual Bonus (also known as reversionary bonus): This is theamount added to a with-profits policy each year. It is a payment onaccount towards the full share of policy earnings which will bepayable at the date of claim. For most policies it is expressed asone percentage applying to the guaranteed benefit and a furtherpercentage applying to the bonus already added in previousyears.

Additional bonus (also known as terminal bonus): At the date ofclaim the total of the guaranteed benefit and annual bonuses todate is compared with the total earnings of the policy. Any balanceis made up through the declaration of an additional bonus.Additional bonus rates are expressed as a percentage of theguaranteed benefit and will form a scale of rates that will varyaccording to the year the policy was taken out.


Contributions buy units in the With-Profits Fund. The unit priceincreases as the annual bonus is added on a daily basis.

The payout for a unitised with profits policy is made up of twoelements: The value of units and additionalbonus.

Value of units: This is the value of the units held.

Additional Bonus: At the date of claim the value of the units iscompared with the total earnings of the policy. Any balance is madeup by the declaration of an additional bonus. Scales are expressedas percentage of the unit value and vary according to the year themoney was invested. Different additional bonus rates will apply tothe units bought with the different years' contributions.

Please note: The above is designed as an introduction to bonusterms. For details relating to specific policies, you should referto the policy terms and conditions.


10 year endowment
Average rate of
Inflation to
December 1998.
Guaranteed benefit£5,533£5,533 
Annual bonus£2,293£2,539 
Additional bonus£2,103£1,991 
Total payout£9,929£10,063 
25 year endowment
Average rate of
Inflation to
December 1998.
Guaranteed benefit£14,260£14,260 
Annual bonus£38,145£39,642 
Additional bonus£45,632£46,345 
Total payout£98,037£100,247 
15 year self-employed pension
Average rate of
Inflation to
December 1998.
Guaranteed benefit£36,596£37,167 
Annual bonus£39,010£43,209 
Additional bonus£31,473£37,538 
Total payout£107,079£117,914 

The endowment policies examples above are based on a male aged 30next birthday, when the policy was started, for a monthly premiumof £50. Self-employed pension policies are as issued to a male fora monthly premium of £200 maturing at age 65, with a return of funddeath benefit.

Note: £30 a month endowment figures available on request.


Additional bonus rates have been improved as follows:

Savings business1.1.991.1.98
1989 money6%1%
1990 money14%7%
1991 money23%14%
1992 money32%21%
1993 money23%14%
1994 money19%10%
1995 money19%10
1996 money15%4%
1997 money9%2% (#)
1998 money2.5%(#)nil
Pensions business1.1.991.1.98
1987 money15%6%
1988 money15%6%
1989 money10%3%
1990 money15%6%
1991 money27%18%
1992 money34%25%
1993 money26%17%
1994 money22%12%
1995 money21%12%
1996 money16%5%
1997 money10%2%(#)
1998 money3%(#)nil

N.B The additional bonus rate is a percentage increase to the unitvalue and varies according to the year the money was invested. (#:provided units have been held for at least a year).

Important notes:

Future bonus rates are not guaranteed and may vary, as theydepend on profits yet to be earned. Past performance is notnecessarily a guide to the future.

The value of investment linked funds can go down as well as up.The illustrative maturity amounts include periods of high inflationand high investment returns.

We may apply a market adjustment factor on encashments (excepton maturity or death) which will reduce what you get back from theunitised with-profits fund.

A building society/bank account is deposit based and is suitablefor the short term. The treatment of your capital and the way inwhich your investment grows differs between the two forms ofsaving. The building society/bank account returns used in thisdocument are based on the Halifax Solid Gold 90 Day Account(Source: Hindsight) The comparison would show a different positionover the shorter term. Full written terms and conditions of NorwichUnion products are available on request. Norwich Union Life &Pensions Limited is regulated by the Personal Investment Authorityand only advises on its own products.

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